CSSF Circular 25/901: Key Questions for Luxembourg Fund Boards
Circular CSSF 25/901 modernises the framework for Luxembourg SIFs, SICARs and Part II UCIs. Its principles are concise, but their practical effect reaches investment limits, borrowing, liquidity, disclosure and the evidence a board should retain.
Executive summary
The circular took effect on 19 December 2025. It consolidates and replaces several older CSSF circulars, introduces investor-profile-based limits, clarifies ramp-up and wind-down periods, updates borrowing parameters and strengthens expectations for clear, complete sales documents. Boards should verify scope, document the chosen limits, reconcile offering documents with operating practice and ensure exceptions are escalated with a reasoned record.
What the circular changes
Circular CSSF 25/901 applies to specialised investment funds, investment companies in risk capital and undertakings for collective investment subject to Part II of the Law of 17 December 2010, including their compartments. ELTIFs, money market funds, EuVECAs and EuSEFs fall outside its scope, as do certain closed-ended funds authorised before its application date.
The CSSF has consolidated a fragmented body of guidance into one thematic text. The circular repeals Circulars 02/80, 07/309 and 06/241, together with specified chapters of Circular IML 91/75, while rendering other legacy provisions inapplicable to Part II UCIs. Existing funds may continue to apply rules adopted before 19 December 2025, but new launches and material changes should be reviewed against the modernised framework.
The most visible change is a more explicit link between investor profile and permitted risk. For funds available to non-well-informed retail investors, the circular generally sets a 25% concentration limit for a single issuer, person, target vehicle or other value, subject to stated exceptions. For funds reserved to well-informed or professional investors, that limit is generally increased to 50%. Infrastructure concentration may reach 50% for retail-facing funds and 70% for well-informed or professional investors. The CSSF may grant or require other limits on a reasoned basis.
Board question 1
Does the circular apply to every compartment, and which legacy rules remain relevant?
The analysis should be performed at fund and compartment level. The board should identify the legal form, regulatory status, investor category and any EU label that changes the scope. For an existing vehicle, it should distinguish rules embedded before 19 December 2025 from later amendments that may bring the new framework into play.
A short scope memorandum can be valuable. It should identify the applicable legal regime, the circular’s application, any exclusion, the date of authorisation and the treatment of each compartment. This avoids relying on a general assumption that all products within a platform are governed identically.
Board question 2
Are the investment limits and their calculation base explicit?
The circular permits limits to be calculated by reference to assets or subscription commitments and, with justification accepted by the CSSF, potentially another base. That flexibility makes precision essential. The board should understand the chosen denominator, the look-through treatment of intermediate vehicles and the circumstances in which target-fund compartments are treated separately.
The document should not merely repeat a percentage. It should explain the calculation base, the treatment of derivatives and counterparty risk, the position on indirect investments, and the controls used to detect an actual or expected breach. Where a derogation is sought, its investment rationale and investor-protection implications should be recorded.
Board question 3
Are ramp-up and wind-down periods defined and governed?
The sales document may provide periods during which investment limits do not yet apply or cease to apply. A strategy investing mainly in UCITS-eligible assets may generally use a ramp-up of up to twelve months. Private investments may justify a longer period, in principle up to four years, with a possible exceptional extension subject to CSSF acceptance.
Relief from fixed limits is not relief from governance. During ramp-up or wind-down, the fund must avoid excessive risk and previously unidentified conflicts. The board should therefore receive information on deployment, temporary cash management, concentration, expected exit timing and the continuing appropriateness of the stated period.
Board question 4
Does the borrowing framework match both the strategy and the investor base?
For SIFs and Part II UCIs marketed to non-well-informed retail investors, borrowing for investment purposes should in principle not exceed 70% of assets or commitments. The circular does not impose that limit on funds reserved to well-informed or professional investors; those products set their own maximum borrowing limit. This does not displace AIFMD leverage requirements.
Boards should distinguish subscription-line facilities, temporary arrangements fully covered by commitments, asset-level borrowing and structural leverage. The stated limit should match the legal documents, financing agreements, risk reporting and the leverage measures calculated under applicable law.
Board question 5
Are investor disclosures clear, complete and operationally accurate?
Circular 25/901 requires information in the sales document to be correct, clear and not misleading. It specifies disclosure expectations for strategy, portfolio composition, asset classes, limits, indirect investments, risks, conflicts, techniques, borrowing, subscriptions, redemptions and liquidity-management tools.
This is a governance issue, not only a drafting exercise. The board should test whether the document describes what the product actually does. Redemption frequency should be consistent with the liquidity of the assets. The treatment of deferred redemption orders should be explicit. Related-party target funds, associated fees and material conflicts should be visible. Changes to investment policy or other material terms should follow the disclosed process.
A practical board agenda
- Confirm the circular’s scope by fund and compartment.
- Approve a documented schedule of investment and borrowing limits.
- Verify alignment between the sales document, compliance system and risk reports.
- Set specific oversight for ramp-up, wind-down and temporary liquidity.
- Review look-through, counterparty and collateral treatment.
- Challenge the liquidity terms and redemption mechanics against the assets.
- Track breaches, derogations and remediation to closure.
The circular gives Luxembourg funds useful flexibility. The board’s task is to ensure that the flexibility is deliberate, disclosed and controlled—and that the governance record makes that visible.
Primary sources
- Circular CSSF 25/901, published 19 December 2025.
- CSSF communication on Circular 25/901 and the compilation of key concepts.
Author: Prudentia Advisory
This publication is provided for general information only and does not constitute legal, tax, regulatory or investment advice. The appropriate analysis depends on the vehicle, documents, investor base and circumstances concerned.
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